How Does Divorce Affect Your Estate Plan?

Divorce can significantly disrupt your daily life and even affect your estate plan. When a divorce is final, Arizona law automatically revokes some provisions in estate-planning documents that name your former spouse as a primary beneficiary or fiduciary. However, you may still need to address other estate planning issues.

At Mushkatel, Gobbato, & Kile, P.L.L.C., our attorneys have extensive experience in helping individuals throughout Sun City, Scottsdale, Surprise, and Maricopa County address divorce and estate planning matters. Consult our team today to learn more about the effect of a divorce on your estate plan in Arizona.

What Types of Assets are Untouchable in an Arizona Divorce?

Arizona law recognizes that some assets are separate property, meaning they are exempt from division during divorce proceedings. Separate property includes:  

• Assets owned before marriage
• Property one spouse acquires by gift or inheritance during marriage
• Property designated as such in a valid prenuptial or postnuptial agreement.

The classification isn’t always straightforward. Separate property can become commingled with community property through various actions, potentially converting it to marital assets that are subject to division. For example, if you inherited $100,000 and put it into a joint checking account that you kept for household expenses, the inheritance may lose its separate property status.

Separate property gives you control of the distribution of your assets through a will or trust. You can designate any beneficiaries you choose without concern for your former spouse’s claims. However, if you have any questions about whether assets are truly separate, resolving these issues during the divorce process is essential before updating your estate plan.

Is a Divorced Spouse Entitled to Their Spouse’s Inheritance?

Under Arizona law, inheritance received by one spouse during the marriage is generally considered that spouse’s separate property. So, it is not subject to division in a divorce if you do not mingle the inherited funds.

From an estate planning perspective, a more pressing concern is what happens to your estate if you die while you are still married but separated, or if you die after a divorce without updating your estate plan. Upon finalization of divorce, Arizona law automatically revokes provisions in your will that name your former spouse as a beneficiary, personal representative, trustee, or one with any fiduciary duties.

However, the automatic revocation occurs only after the divorce is final. Due to your marital status, if you die during separation or while divorce proceedings are pending, your spouse may still inherit according to your existing estate plan. Additionally, the automatic revocation doesn’t apply to assets passing outside your will, such as life insurance policies, retirement accounts, or jointly held property with rights of survivorship.

What Is Community Property?

Arizona is a community property state. Most assets and debts acquired during marriage are owned equally by both spouses, regardless of whose name is on the title or account.

Community property includes:

• Wages earned by either spouse during marriage
• Property purchased with community funds
• Retirement benefits accrued during marriage
• Debts accumulated for the benefit of the family.

The community property system presents unique estate planning considerations. During marriage, each spouse can dispose of only their half of the community property through their estate plan. After a divorce, the distributed community property becomes the separate property of the person who received it in the divorce settlement, granting them testamentary freedom over these assets.

What Steps Can I Take to Protect My Assets During Divorce?

Protecting your assets during divorce requires immediate defensive measures and strategic long-term planning. An experienced attorney can explain the different steps you can take in your divorce/estate planning, such as the following:

• Gather comprehensive documentation of all assets and debts, including account statements, property deeds, and records of separate property.
• Understand your legal restrictions, which include avoiding dissipating marital assets or taking actions that could be viewed as hiding assets.
• Consider interim changes to your estate plan that protect you without violating legal requirements, such as updating healthcare directives to name someone other than your spouse as your medical decision-maker.
• Protect separate property by maintaining strict separation of separate and marital funds.
• Coordinate your divorce strategy with estate planning considerations to ensure decisions made during property division don’t create long-term planning problems.

Should I Update My Life Insurance Designations During the Divorce?

Life insurance designations present unique challenges because they exist outside your will and aren’t automatically revocable under Arizona’s divorce statute.

Beneficiary designations on life insurance policies supersede contrary provisions in your will. So, if your policy still names your ex-spouse as beneficiary, they’ll receive those proceeds regardless of what your will says.

Upon finalization of a divorce, Arizona law automatically revokes naming your former spouse as a beneficiary, unless the divorce decree requires the surviving spouse to maintain the designation. However, this protection only applies after the divorce is final.

You must be cautious about changing beneficiary designations during divorce proceedings, as many divorce petitions include automatic temporary restraining orders that prohibit such changes. The safest approach is to consult with your divorce attorney before making any changes to your financial situation. After your divorce finalization, review and update all life insurance policies to reflect your current wishes.

Will Divorce Affect My IRA Designations?

Like life insurance, retirement accounts are typically passed according to beneficiary designations rather than your will. Arizona’s automatic revocation statute applies to retirement account beneficiary designations, automatically revoking your ex-spouse as beneficiary upon finalization of divorce. However, this protection only takes effect after the divorce is final.

During divorce proceedings, temporary restraining orders typically prohibit changing the beneficiaries of retirement accounts. Additionally, federal law, specifically ERISA, governs many employer-sponsored retirement plans and can override state law provisions in certain circumstances.

If your spouse is entitled to a portion of your retirement benefits as part of the divorce settlement, this is typically accomplished through a Qualified Domestic Relations Order (QDRO). After your divorce is final and any QDRO is in place, immediately review and update beneficiary designations on all retirement accounts. Consider the tax implications of your beneficiary choices and update contingent beneficiaries accordingly.

How Can an Arizona Divorce Lawyer Help Me?

Addressing the intersection of divorce and estate planning requires legal knowledge spanning multiple practice areas. At Mushkatel, Gobbato, & Kile, P.L.L.C., our estate planning attorneys can provide comprehensive guidance that addresses your immediate divorce concerns and long-term estate planning needs.

During the divorce process, we help you understand how property division will impact your estate planning, identify separate property that should be protected from division, negotiate favorable settlement terms, and address life insurance and retirement account issues in your divorce decree.

Meanwhile, our qualified estate planning attorneys can provide professional guidance and help you understand how Arizona’s automatic revocation statute protects you and identify any remaining gaps. After your divorce is complete, we can guide you through updating your entire estate plan, including drafting new wills, revising trusts, updating powers of attorney and healthcare directives, and reviewing all beneficiary designations.

Contact an Arizona Divorce/Estate Planning Lawyer Near You

If you face separation or divorce in Sun City, Scottsdale, Surprise, The Valley, or anywhere in Maricopa County, don’t wait to address the impact on your estate plan. At Mushkatel, Gobbato, & Kile, P.L.L.C., we combine the personalized attention and accessibility of a small firm with the sophisticated legal knowledge and resources necessary to handle complex divorce and estate planning matters.

Our past clients consistently note our responsiveness and commitment to achieving favorable outcomes. Whether you’re just beginning to consider separation or finalizing your dissolution and ready to update your estate plan, contact us today to schedule a consultation.

Visit Our Arizona Divorce and Estate Planning Law Offices

About the Author

Zachary Mushkatel

Zachary Mushkatel is a founding attorney of Mushkatel, Gobbato, & Kile, P.L.L.C., who has practiced law in Arizona since 2004. He also practices before the U.S. District Court for the District of Arizona and the U.S. Court of Appeals for the Ninth Circuit. A graduate of the University of Arizona and the University of Minnesota Law School, he started his career as a public defender and entered private practice in criminal defense. In 2008, Zachary co-founded a firm dedicated to civil law in addition to criminal defense, and he has since expanded his practice to personal injury, estate planning and litigation, guardianships, conservatorships, probate, corporate litigation, real estate, and various civil matters. He serves on the board and faculty of the Arizona College of Trial Advocacy, and he is a past president and current member of the West Maricopa County Bar Association.

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